From the Rock to the Chain

The world’s most famous investor Warren Buffet is not a fan of gold. He once famously said, “it has no utility” and that for investors “anyone watching from Mars would be scratching their head”. Thankfully for Chubb’s Valuable Goods practice, the rest of the world does not share his views. Gold is seen as the ultimate hedge against economic uncertainty. It is used by central banks, commercial banks, governments and individual investors worldwide and in industries for a variety of purposes from catalytic convertors to teeth fillings.

Whilst gold is mined throughout the world, 45% of the world’s total gold production throughout history comes from a single area of South Africa. If all the gold ever mined in history was put in one place, it would fit into a cube with sides of just 20 meters.

The ‘Gold bug’ is no illusion – gold and precious metals are part of our DNA in society. In Hollywood films, villains steal it from well protected vaults and heroes regularly stumble across entire rooms of gold coins and jewellery. It has always been desirable, romantic and the ultimate status symbol. It was ever thus, gold has been used as currency and jewellery since 700BC and to this day, many countries proudly issue bullion coins with totems of their nationalities – the American Eagle, Australian Kangaroo, Chinese Panda and the Austrian Philharmonic are just a few of the bullion coins on offer.

Why valuable goods (specie) insurance?

At Chubb, we insure the gold industry from its time of extraction at the mine site, through the refining process, transit, storage and sale to customer. We have produced a new, simple broad form of insurance with limits up to $250 million and cover specifically designed for precious metals and valuable goods. We cover physical loss or damage to valuable goods on premises or in transit throughout the world and in all forms from dore to bars from coins to bracelets. Our insurance product provides the financial protection and security needed when our clients own or are responsible for the high values and risk associated with storage and transit of precious metals. We have insured some of the world’s biggest mining companies, banks, storage facilities and investors.

Our gold logistics practice can cover gold dore from the remote mine site for land, air and sea transits. Gold can be in concentrate, scrap, dore or as a finished product – cover includes any incidental storage. We have insured gold in all forms whilst in transit from dore and bars through to a 1,000 kg gold coin travelling the world on exhibition. We take the time to understand the industry’s needs and have visited mine sites and refineries in Africa, as well as vaults in Europe and Asia.

Common causes & losses associated with storage and precious metals in transit

The most common form of claims for gold in transit is mysterious disappearance, substitution or theft committed either by an employee or by a third party who has received insider information. Whilst it is true to say that much of this risk can be offset by preventative risk management such as tamper proof packaging, varying transit routes, varying transit staff and spot audit procedures some major losses are impossible to predict. They can arise from circumstances that simply can’t be controlled such as a major accident to the travelling vehicle, sophisticated large scale heist, fire, flood or other natural disaster. We have seen all of the above losses at Chubb.

So when Mr Buffet went on to say about Gold investment “it’s much better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage”, we would like to assure him that Chubb’s Valuable Goods Insurance product is 99.99% certain to change his mind.

Written by Ben Dunston

Ben is the Fine Art and Valuable Goods Underwriting Manager for Asia Pacific and has worked in precious metals and cash insurance for 16 years. He has travelled the world visiting clients in the precious metals, diamond and cash industries from mining companies, refineries through to retail gold sellers. In 2011, Ben started the Specie division at Chubb Syndicate 1882 in Lloyds of London and now works in the Asia Pacific regional office in Singapore. Contact Ben Dunston for more details: bdunston@chubb.com